The GOP’s Fiscal Cliff Doomsday Plan: Not Good, But Not Armageddon Either

The GOP is starting with a weak hand in the fiscal cliff negotiations.

Obama did talk a lot about tax hikes for the rich during his campaign and he won. Moreover, polls indicate that the public is on Obama’s side in that argument. In addition, because of the complete ineffectiveness of the Republican leadership in Congress, polls also show that the American people would blame the GOP if we go over the fiscal cliff despite the fact that the Democrats are sending every signal that they’re indifferent to whether a deal gets done or not.

At this point, the Democrats’ strategy seems clear: They don’t intend to cut a deal. Instead, they’re going to go over the cliff, whip the media up into full crisis mode, blame the Republicans for any economic problems that occur, and accuse them of raising taxes on 98% of Americans. The hope then will be to stampede the GOP into raising taxes and getting rid of the debt limit in return for the Democrats signing on to any kind of face saving deal.

Would it actually play out this way?

It shouldn’t, but Republicans in Congress are a little shaky and panicked after losing an election they thought they should have won.

Republicans are seriously considering a Doomsday Plan if fiscal cliff talks collapse entirely. It’s quite simple: House Republicans would allow a vote on extending the Bush middle class tax cuts (the bill passed in August by the Senate) and offer the President nothing more: no extension of the debt ceiling, nothing on unemployment, nothing on closing loopholes. Congress would recess for the holidays and the president would face a big battle early in the year over the debt ceiling.

Two senior Republican elected officials tell me this doomsday plan is becoming the most likely scenario. A top GOP House leadership aide confirms the plan is under consideration, but says Speaker Boehner has made no decision on whether to pursue it.

Under one variation of this Doomsday Plan, House Republicans would allow a vote on extending only the middle class tax cuts and Republicans, to express disapproval at the failure to extend all tax cuts, would vote “present” on the bill, allowing it to pass entirely on Democratic votes.

By doing this, Republicans avoid taking blame for tax increases on 98 percent of income tax payers. As one senior Republican in Congress told me, “You don’t take a hostage you aren’t willing to shoot.” Republicans aren’t willing to kill the middle class tax cuts, even if extending them alone will make it harder to later extend tax cuts on the wealthy.

Would this be the ideal? No, but let’s face it, the Democrats are making it clear that they have no interest in engaging in any sort of real compromise. To the contrary, their goal seems to be to play this for the maximum amount of political gain. Moreover, Republicans are making it clear that whether it ends up being called a tax increase or increased revenue, the GOP is going to go along with the government taking in more tax dollars.

So, if the GOP extends the middle class tax cuts, which is something they support, then a tax increase on the wealthy is probably a given, but Obama loses his leverage. It wouldn’t be the best outcome, but elections have consequences and one of those consequences is that the GOP seems very unlikely to come out of this with a good deal. This could very well turn out to be the “least bad” of all the possible options.